Bank of America is a popular bank in various states across the country, but its popularity may be waning. In fact, it may become the least popularinstitute of its kind on April 11, which is when the bank plans to impose a $59 annual fee to some of the consumers that have the bank’s credit card. The annual fee will be imposed on approximately 5% of the credit card holders, which equates to about 2 million of the 40 million customers that are current cardholders.
What may be the most interesting part of the move by Bank of Americais the customer profiles that fall within those 2 million people. According to a representative for the bank, the customers that will incur the new annual fee are those that would not be able to qualify for the card if they were to apply for it today (So much for rewarding your loyal customers, Bank of America.).
In the end, of course, the decision most likely comes down to money for the bank. Implementing the annual fee is expected to generate $118 million in additional revenues for the bank. The move is also in response to the new credit card rules that rolled out this year. These laws limit the reasons why credit card issuers can change interest rates and fees and also dictates when issuers can make these moves.
The Credit Card Accountability, Responsibility and Disclosure Act
Known as the CARD Act, the new credit card laws that credit card issuers have to abide by are part of the Credit Card Accountability, Responsibility and Disclosure Act. For example, the law states that credit card issuers cannot increase the interest rate on an existing credit card account unless the cardholder is 60 days or more delinquent on making a payment. Even if the cardholder only makes the minimum payment, as long as they are not more than 60 days past due, then the card issuer’s hands are tied.
Making Up for Lost Revenues
Most consumers and even financial experts agree that the annual fee is Bank of America’s way of circumventing these laws. While Bank of America is not specifically stated as one of the banks, some banks are starting to charge fees for account services that were once free. Fees for calling customer service or transaction fees are a few examples of additional ways that banks are finding ways to make up for the loss of fees from not being able to make interest rate increases and assessing other types of fees.
Some studies estimate that the loss of revenues to the banks total $25 billion annually. At least for Bank of America, instituting the annual fee takes a chunk out of its loss in revenues.